Las Cruces former mayor: Boulder must carefully weigh municipal utility costs

BOULDER – Boulder should watch its spending closely as it seeks to form its own electric utility, former Las Cruces, N.M., mayor Bill Mattiace told an audience in Boulder on Wednesday.

Mattiace shared with Boulder businesspeople and city officials the story of his city’s failure to form its own electric utility when it tried to separate from El Paso Electric. Boulder Tomorrow, a nonprofit business organization, played host to the discussion at the Millennium Harvest House.

Mattiace made similar remarks when he visited the city three years ago. He acknowledged the differences between the cities, but highlighted the unknown costs of municipalization as a key similarity.

When he took office as a city councilman in 1999, Las Cruces already had spent millions of dollars and several years trying to form a municipal utility. The city council ultimately voted to drop its municipalization efforts after miscalculating the total costs of the effort.

“They just kept spending the money, and they didn’t know the numbers,” Mattiace said.

Mattiace’s visit follows a petition filed July 17 by Boulder to condemn portions of the electric system owned by Xcel Energy Inc. (NYSE: XEL) through eminent domain. The move was a part of efforts by the city to form its own utility to generate more electricity from renewable sources.

Xcel does not want to sell its assets and has sued the city, contending that it overstepped its authority by creating a municipal utility. The company says it can help Boulder reach its renewable energy targets quicker and more economically than the city can do on its own.

Boulder officials say they have done their homework since Mattiace’s last visit. City officials point to a key difference: the city of Las Cruces issued bonds to finance its municipal utility before condemning El Paso Electric’s assets. Boulder instead has sought first to condemn Xcel’s assets before issuing bonds.

Boulder has set a $214 million cap on spending to acquire Xcel’s assets, although a report by Boulder city employees and consultants says forming a utility could cost as much as $405 million.

“What are the true costs? That’s one issue that we don’t know, and that’s an issue that, of course, Las Cruces wasn’t aware of in terms of stranded cost obligations,” said Jonathan Koehn, regional sustainability coordinator for the city of Boulder.

Stranded costs mean investments made by a utility to serve customers in a future period. Koehn said that the city has explored ranges of costs to acquire Xcel’s assets, but the city will not issue debt until it has more information.

“It’s really important to me that we make the right decision and any recommendation we as staff make to our elected officials is grounded in reality, is grounded in facts,” he said.

Mattiace visited Boulder again to reflect on new steps Boulder has taken to form a municipal utility, Boulder Tomorrow’s executive director Dan Powers said.

“The takeaway is meant to be some key questions we – taxpayers, voters, ratepayers – should be asking,” Powers said.